SunEdison expands 2-3 points on hedge; Illumina sells upsized $1 billion deal; some selling

By Rebecca Melvin

New York, June 5 – SunEdison Inc.’s newly-priced 0.25% convertibles gained 2 to 3 points on a dollar-neutral basis Thursday after the semiconductor and solar technology company priced $500 million of the 5.5-year senior notes beyond the tight end of coupon talk and at the tight end of premium talk.

The new SunEdison bonds were seen last at 102 bid, 102.5 offered with the stock at $20.25, according to a syndicate source.

TPG Specialty Lending Inc.’s new 4.5% convertibles were also in trade and seen at 100.5 bid, 101 offered early on when the shares of the Fort Worth, Texas-based business development company were off about 1% at $22.61.

TPG’s shares ended a little better but still off 0.6%.

Market players were eyeing Illumina Inc.’s planned offering during the session. After the market close the Illumina deal priced as an upsized $1 billion of convertibles in two tranches at the rich end of talked terms.

The planned Illumina notes were seen in the gray market ahead of terms being fixed at 100 to 100.75, a New York-based trader said.

“It’s a large issue and a visible credit. And people have made money in it before,” the trader said of the Illumina offerings.

Also pricing after the market close was Laclede Group Inc.’s $125 million of mandatories that were seeing robust demand as the amount of mandatory paper has diminished, the trader noted.

SunPower Corp.’s planned $400 million of seven-year convertible senior debentures, and Trina Solar Ltd.’ s planned $150 million of convertible notes – also pricing after the market close – were not heard in the gray market.

SunPower’s existing 4.5% convertibles due 2015 were actively traded and they were purchased late in the session at 156.75 versus an underlying share price of $34.25.

Elsewhere, there was some selling of convertibles as portfolio managers made room for new paper, of which there has been more than $2 billion this week.

But opinion was mixed as to how the market held up overall. One trader said things felt a little heavy, while a second trader said things were better.

A couple of recent new issues, including Fluidigm Corp.’s 2.75% convertibles due 2034, which priced on Jan. 28, have come in a couple of points this week. The Fluidigm bond last traded at 92.375 versus an underlying share price of $25.97.

“With shares down, outright guys are starting to lighten up a little bit,” a trader said of Fluidigm.

Meanwhile, Spectranetics Corp.’s 2.625% convertibles, which debuted in the market a week ago, were seen to have contracted 0.25 point to 0.5 point in the last couple of days, last trading at 103.375 bid, 103.875 offered versus an underlying share price of $21.72. But the deal was still up a good bit from issue.

New SunEdison gains

SunEdison’s new 0.25% convertibles due 2020 were seen last at 102 bid, 102.5 offered with the underlying shares at $20.25.

Given that the stock was down 42 cents, or 2%, at the end of the session, that represented a gain on swap of about 2 to 3 points.

Earlier in the session the bonds had traded at 101.75 bid, 102.25 offered with the underlying shares at $20.10

SunPower’s existing 2% convertibles and 2.75% convertibles, which priced in December, also traded actively but didn’t contract with the new issue, a syndicate source said late Thursday.

Given the scant 0.25% coupon compared to the older convertibles, “the new ones weren’t that cheap compared to the olds,” a Connecticut-based trader said.

Meanwhile, the company’s market capitalization has ballooned to $5.45 billion currently from $3 billion in December.

The new deal has a 5.5-year maturity, which was pulled out a little from the typical five-year maturity in order to get the desired coupon. In fact, about 95% of the other parameters were fixed to get the optimal coupon, the syndicate source said.

In addition, solar stocks have been strong lately and SunEdison, which has transformed itself with a couple of acquisitions, is a benchmark security, the syndicate source said.

The St. Peters, Mo.-based semiconductor and solar technology company’s offering was talked originally at a 0.5% to 1% coupon and a 25% to 30% premium.

The deal also came with a call spread aimed at facilitating hedged investor participation.

About $350 million to $400 million of proceeds will be used to fund acquisitions, development and construction costs and the repayment of project indebtedness for solar projects to be contributed to TerraForm Power Inc., its yieldco subsidiary, or operating solar projects held on its balance sheet, and for other general corporate purposes. About $41.8 million of proceeds will fund the net cost of the convertible note hedge and warrant transactions, or the call spread.

The strike on the warrant transactions will be about $37.21 initially, which represents a premium of 80% from the issuer’s perspective.

Joint bookrunners were Deutsche Bank Securities Inc., Goldman Sachs & Co., Wells Fargo Securities LLC and Barclays. There is a greenshoe equal to 20% of the base deal, or $100 million.

Illumina prices upsized $1 billion

Illumina, a San Diego-based developer of genetic research tools, priced two tranches of convertible senior notes late Thursday, including an upsized $550 million of 0%, five-year notes and $450 million of seven-year tranche to yield 0.5%,. Both issues have an initial conversion premium of 55%.

The deals were initially talked at $900 million in two equal tranches.

The five-year notes have an over-allotment option for $82.5 million of additional notes and the seven-year notes have an over-allotment for $67.5 million of additional notes.

The notes are non-callable with no puts and standard takeover and dividend protection features.

Joint bookrunners were Goldman Sachs & Co. and BofA Merrill Lynch.

Proceeds will be used to repurchase or repay a portion of Illumina’s 0.25% convertibles due 2016. Remaining proceeds will be for general corporate proceeds.

Mentioned in this article:

Fluidigm Corp. Nasdaq: FLDM

Illumina Inc. Nasdaq: ILMN

The Laclede Group Inc. NYSE: LG

Spectranetics Corp. Nasdaq: SPNC

SunEdison Inc. Nasdaq: SUNE

SunPower Corp. Nasdaq: SPWR

TPG Specialty Lending Inc. Nasdaq: TSLX

Trina Solar Ltd. NYSE: TSL

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